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As economic pressure mounts on customers, brokers must beware the temptation to seek out unrated capacity argues Tim Mullin, Director of Product & Insurer Strategy, Arc Legal Group in an exclusive blog for Insurance Age.

It’s a tale as old as time (almost), but we’re still seeing brokers taking a risk on unrated paper, particularly as customers push for more competitive quotes, and whilst there’s a place for unrated paper, Tim believes that place is not the volume-driven ancillary market.

“Whilst ancillary, or ‘add-on products,’ such as Legal Expenses Insurance (LEI) and Assistance policies may be relatively low cost, with low claims severity, on an aggregated basis they could pose a high risk to consumers if the insurer is unable to fulfil their obligations.”

Brokers have a duty of care to their customers to place their risks with resilient providers that have a strong, financial rating from a credible agency such as AM Best, Standard & Poor’s, or Moody’s.

By taking a chance on unrated paper to secure a more competitive quote, brokers not only risk their own reputation but could also leave their customers unprotected should the provider fail. As many unrated carriers are based outside the UK, customers have no recourse to the UK’s Financial Services Compensation Scheme.

As a specialist provider, we have the knowledge and insights that allow us to work closely with our partners in these challenging times to provide bespoke, flexible products to suit end customers pockets – from core, essential covers to full ‘belt and braces’ cover with additional optional services, all backed by rated paper and providing the one key thing that insurance is designed to offer – peace of mind.

Read the full article here (subscription needed)

Tim Mullin, Director of Product & Insurer Strategy, Arc Legal Group

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